ModernGraham Valuation Of Amazon

Here is a look at how Amazon.com (NASDAQ:AMZN) fares in ModernGraham's opinion, based on an updated and modernized version of Benjamin Graham's requirements of defensive and enterprising investors from The Intelligent Investor:

Value investors seeking to follow Benjamin Graham's methods have established criteria for whether a company is worthy of investment. In the case of Amazon, the company scores almost as poorly as is possible under these requirements. In fact, the only requirement for either the Defensive Investor or the Enterprising Investor that Amazon satisfies is the market cap. As a result, includes a level of risk that is far too high for either investor type, and Intelligent Investors would be best suited by researching other opportunities, beginning with a review of ModernGraham's Valuation of Apple (NASDAQ:AAPL) (here). From a valuation side of things, Amazon's EPSmg (normalized earnings) have dropped from $1.08 in 2008 to an estimated $0.90. This drop in earnings leads the ModernGraham valuation model to return an intrinsic value of $0, indicating that any value in the company must come from something other than earnings. It should also be noted that the market seems to be implying a growth rate of over 200%, which is far above what the company has achieved historically. As a result, Amazon would appear to be overvalued at this time.

Disclaimer: The author did not hold a position in Amazon Inc. (AMZN) at the time of publication and had no intention of changing that position within the next 72 hours.